Oil edges up on OPEC cuts, US sanctions against Venezuela and Iran

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Reuters
KEY POINTS
  • U.S. West Texas Intermediate (WTI) crude oil futures were at $56.45 per barrel at 0234 GMT, up 23 cents, or 0.4 percent, from their last settlement.
  • Brent crude futures were at $66.36 per barrel, up 37 cents, or 0.6 percent.
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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.
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Oil edged up on Thursday amid ongoing OPEC-led supply cuts and U.S. sanctions against exporters Venezuela and Iran, although prices were prevented from rising further by record U.S. crude output and rising commercial fuel inventories.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.45 per barrel at 0234 GMT, up 23 cents, or 0.4 percent, from their last settlement.

Brent crude futures were at $66.36 per barrel, up 37 cents, or 0.6 percent.

Prices are being supported by efforts led by the Organization of the Petroleum Exporting Countries (OPEC) and other countries – a grouping known as ‘OPEC+’ – to withhold around 1.2 million barrels per day (bpd), a strategy designed to tighten markets.

“In our view, OPEC’s strategy is to rebalance the market as quickly as possible and exit the cuts by the end of June in order to grow production alongside shale producers in the second half of this year,” U.S. investment bank Goldman Sachs said in a note on Wednesday.

U.S. sanctions against the oil industries of OPEC members Iran and Venezuela have also had an impact, traders said.

Venezuela’s state-run oil firm PDVSA this week declared a maritime emergency, citing trouble accessing tankers and personnel to export its oil amid the sanctions.

Surging U.S. supply

Despite these factors, oil remains in plentiful supply thanks to surging U.S. production.

U.S. crude oil stockpiles rose much more than expected last week, with inventories up by 7.1 million barrels to 452.93 million barrels, according to a weekly report by the U.S. Energy Information Administration (EIA) on Wednesday.

Meanwhile U.S. crude oil production remained at a record 12.1 million bpd, an increase of more than 2 million bpd since early 2018.

That, along with the easing of a transportation bottleneck for low-cost U.S. Permian Basin shale oil, could produce sequentially higher production, Goldman Sachs said.

“The balance between rising U.S. production and the OPEC+ efforts to stabilise prices with a production cut was broken by higher than expected U.S. inventories and the OECD warning of lower global growth impacting energy demand going forward,” said Alfonso Esparza, senior analyst at futures brokerage OANDA.

The Organisation for Economic Co-Operation & Development (OECD) said on Wednesday the world economy would grow 3.3 percent in 2019, down 0.2 percentage points from the OECD’s last set of forecasts in November.

Oil dips on US stocks build, production outlook

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Reuters

KEY POINTS
  • Both international benchmark Brent and U.S. crude futures declined.
  • Chevron Corp and Exxon Mobil Corp released dueling Permian Basin projections on Tuesday pointing to big increases in shale oil production.
  • Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected U.S. crude stockpiles.
  • The rise in North American production undermines supply cut efforts led by the Organization of Petroleum Exporting Countries.
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A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Oil prices slipped on Wednesday as bullish output forecasts by two big U.S. producers and a build in weekly U.S. crude stockpiles outweighed ongoing OPEC-led production cuts.

International Brent crude futures were at $65.36 per barrel at 0440 GMT, down 50 cents, or 0.8 percent, from their last settlement.

U.S. West Texas Intermediate (WTI) crude oil futures were also down 0.8 percent, or 45 cents, at $56.11 per barrel.

“Crude oil futures continue to demonstrate whippy trades as markets balance between OPEC-led cuts and the effects of rising U.S. production levels,” said Benjamin Lu, commodities analyst at Singapore-based brokerage firm Phillip Futures.

Increasingly event-driven trading was adding to market volatility, he added.

Chevron Corp and Exxon Mobil Corp released rival Permian Basin projections on Tuesday pointing to increased shale oil production.

If realized, the increases would cement the pair as the dominant players in the West Texas and New Mexico field, with one-third of Permian production potentially under their control within five years.

Data from the American Petroleum Institute (API), an industry group, also showed larger-than-expected U.S. crude stockpiles.

U.S. crude inventories rose by 7.3 million barrels in the week ending March 1 to 451.5 million, compared with analysts’ expectations for an increase of 1.2 million barrels, API said. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.1 million barrels.

“An increase in U.S. crude inventories is weighing on oil prices and in the long term, concerns over rising oil production in the Permian region is keeping a lid on prices,” said Kim Kwang-rae, commodity analyst at Samsung Futures in Seoul.

Official data from the U.S. Department of Energy’s Energy Information Administration is due later on Wednesday.

The rise in North American production undermines supply cut efforts led by the Organization of Petroleum Exporting Countries (OPEC).

OPEC and its allies pledged to curb output by 1.2 million barrels per day, and they are likely to push back their decision whether or not to extend the output cut agreement to June from April, according to sources.

Meanwhile, the market is looking for further signs that the United States and China are making progress in talks to resolve their trade conflict.

U.S. Secretary of State Mike Pompeo said President Donald Trump would reject any trade deal that is not perfect, but added the White House would keep working on an agreement.

Oil falls as China trims economic growth target, but OPEC-led cuts support

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Reuters

KEY POINTS
  • Both international benchmark Brent and U.S. crude futures declined.
  • Oil demand growth has been flagging along with an economic slowdown, especially in Europe and Asia.

Oil prices fell on Tuesday as China cut its 2019 economic growth target, dimming the outlook for fuel demand, although OPEC-led efforts to cut output still offered some support.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.28 per barrel at 0426 GMT, down 31 cents, or 0.6 percent, from their last settlement.

Brent crude futures were at $65.33 per barrel, down 34 cents, or 0.5 percent.

“Near term … it is hard to get very bullish on oil prices. The market is still working off the surpluses built in H2 2018, keeping OECD commercial inventories stuck above the five-year average,” said energy analysts at economic research firm TS Lombard.

Oil demand growth has been flagging along with an economic slowdown, especially in Europe and Asia.

China said on Tuesday it was targeting economic growth of 6.0 to 6.5 percent in 2019, down from the 6.6 percent growth reported last year, which was already the lowest in decades.

Fuel efficiency is also improving, denting demand growth.

“2018 was the weakest (refined product) demand growth year since 2011,” Bank of America Merrill Lynch said in a note.

Trade talk hopes

Optimism that the United States and China will soon end their bitter trade disputes has offered some support.

China’s Commerce Minister Zhong Shan said on Tuesday that trade talks with the United States have been difficult but that working teams from both countries are continuing with their negotiations.

To prop up the market, the Organization of the Petroleum Exporting Countries (OPEC) has led efforts since the start of the year to withhold around 1.2 million barrels per day (bpd) of supply.

The group was due to decide in April whether to continue withholding supply, but OPEC sources said this week a decision would likely be delayed until June, meaning cuts will continue at least until then.

The OPEC-led supply cuts, as well as U.S. sanctions against its members Iran and Venezuela, come at the same time as U.S. crude output chases ever new records, rising by more than 2 million barrels per day (bpd) since early 2018 and above 12 million bpd for the first time in February.

The cuts to OPEC supply have pushed up the Brent international crude price benchmark due to a shortage of the heavy crudes that OPEC mostly produces. At the same time, the surge in U.S. output is weighing down U.S. WTI prices as there is ample supply of America’s mainly light crudes.

Because of this, energy researchers at TS Lombard said “the Brent-WTI spread can be expected to stay wide.”

WTI’s front-month price spread to Brent has declined from near parity in 2016 to an average discount of $8.50 per barrel since the start of 2019.

During the same time, U.S. crude output has risen by almost 3 million bpd.

Oil rises on OPEC’s cuts, but soaring US exports and economic slowdown weigh

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Reuters

KEY POINTS
  • Both international Brent and U.S. crude futures advanced.

Oil prices rose on Friday as markets tightened amid output cuts by producer club OPEC, but surging U.S. supply and a global economic slowdown prevented crude from climbing further.

U.S. West Texas Intermediate (WTI) crude oil futures were at $57.41 per barrel at 0350 GMT, up 19 cents, or 0.3 percent, from their last settlement.

International Brent crude futures were at $66.59 per barrel, up 28 cents, or 0.4 percent.

Traders said oil markets were currently tightening.

In Venezuela, oil exports have plunged by 40 percent to around 920,000 barrels per day (bpd) since the U.S. government slapped sanctions against its petroleum industry on Jan. 28.

This drop comes as the Organization of the Petroleum Exporting Countries (OPEC), of which Venezuela is a founding member, has led efforts since the start of the year to withhold around 1.2 million bpd of supply to prop up prices.

“Global (oil) markets appear tighter than many anticipated for this time of year, but scores of unsold barrels can pile up quickly and saturate regions,” Canada’s RBC Capital Markets said in a research note on oil markets.

Despite this, there are signs that point to a more amply supplied market heading further into 2019.

The U.S. Energy Department said on Thursday it was offering up to 6 million barrels of crude from national emergency reserves to raise funds to modernize the U.S. strategic oil reserves.

Additionally, U.S. crude output has hit a record of more than 12 million bpd, pushing exports to an unprecedented 3.6 million bpd in February.

Investment bank RBC estimated that oil from the U.S. Gulf of Mexico port of Houston “can economically move anywhere globally when priced at a discount of $1.70 per barrel relative to the waterborne Brent benchmark”.

Crude loading from Houston last traded at $6.60 a barrel over WTI, which still put it at a discount of more than $2.15 per barrel to Brent.

On the demand side, a Reuters poll showed analysts expect global fuel demand to slow this year amid a broad economic slowdown.

China’s February factory activity fell for a third month as the world’s second-largest economy continued to struggle with weak export orders, a private survey showed on Friday.

The weakness is being felt across the region. South Korea’s exports contracted at their steepest pace in nearly three years in February as demand from its major market China cooled further in yet another sign of faltering momentum in Asia’s fourth-largest economy.

Despite this, fuel consumption especially in Asia’s developing economies, which are key drivers of global oil demand, is so far holding up.

India’s diesel consumption, for instance, is expected to rise to a record this year amid a strong expansion of its heavy duty vehicles amid economic growth of around 7 percent.

Oil slides as US crude production hits record, Asia factory output weakens

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Reuters

KEY POINTS
  • Both international Brent and U.S. crude futures slipped.
  • Rising U.S. crude production and weakening factory output in China and Japan weighed on prices.
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Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
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Oil prices dipped on Thursday, dragged down by weakening factory output in China and Japan and record U.S. crude output, although markets remained relatively well supported by supply cuts led by producer club OPEC.

International Brent crude futures were at $66.15 per barrel at 0248 GMT, down 24 cents, or 0.4 percent from their last close.

U.S. West Texas Intermediate (WTI) crude oil futures were at $56.92 per barrel, down 2 cents from their last settlement.

Prices were dragged down by surging American crude oil production, which has risen by more than 2 million barrels per day (bpd) over the last year, to an unprecedented 12.1 million bpd.

Traders said China’s weakening economy also weighed on oil prices.

Factory activity in China, the world’s biggest oil importer, shrank for the third straight month in February. China’s official manufacturing gauge fell to a three-year low, highlighting deepening cracks in an economy facing persistently weak demand at home and abroad.

In Japan, Asia’s second-biggest economy, factory output posted the biggest decline in a year in January as China’s slowdown affects the entire region.

Still, oil markets remain relatively well supported by supply cuts by the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-affiliated producers like Russia, known as ‘OPEC+’, agreed late last year to reduce output by 1.2 million bpd to prop up prices.

Because of these cuts, U.S. commercial crude inventories fell 8.6 million barrels in the week to Feb. 22 to 445.87 million barrels.

“Crude imports into the U.S. fell 1.6 million bpd last week, to a two-decade low,” ANZ bank said on Thursday.